How to Roll Over Your 401(k) to a Gold IRA

If you aren’t already invested in gold, now might be the time to do it.

But how will you find the money to invest in gold? The answer may lie in your 401(k) account. A 401(k)-to-gold IRA rollover isn’t hard, and you can maintain all your account’s valuable tax benefits. Keep reading, and we’ll tell you how to do it.

How to execute a 401(k) to gold IRA rollover

Because 401(k) accounts and IRAs are subject to government rules, you must follow a specific process to move money from one account to another. If you don’t, the value of your account could be subject to taxation and maybe even a penalty.

You will need the following three businesses to help you create your gold IRA and execute a rollover:

• Gold IRA company
• IRA custodian
• Gold depository

And here’s a detailed look at the five steps involved.

1. Check with your plan administrator

Start by contacting your 401(k) administrator. This is the financial firm that oversees your account and sends your statements. Check with your employer’s human resources office if you don’t know your account administrator.

If you’re still employed by the company that sponsors your 401(k), you must ask the administrator whether in-service rollovers are allowed. This lets you move all or a portion of your current balance to an IRA while working for the company. Not all employers and administrators allow in-service rollovers.

If you no longer work for the employer, you won’t need to worry about getting permission to execute a rollover. However, you should ask what paperwork is needed to complete the process.

2. Set up a self-directed IRA

Only self-directed IRAs can hold alternate investments such as precious metals. To set up one of these accounts, the IRS requires that you have an approved custodian to manage it. Equity Trust and STRATA Trust are two popular options.

While you can open a self-directed IRA yourself, many people find working with a gold IRA company easier. Firms such as American Hartford Gold and Lear Capital employ professionals who can walk you through finding a custodian and setting up an account.

3. Move money from your 401(k) to the self-directed IRA

Once you set up the self-directed IRA, you must transfer money from your 401(k).

This step is the most important part of the 401(k)-to-gold IRA rollover process. Doing it incorrectly could have serious tax consequences.

A representative from a gold IRA company can assist you and help ensure the transfer is completed properly.

4. Use money in the self-directed IRA to purchase IRS-approved gold

After your IRA is funded, you can purchase gold coins, rounds, and bars. You can also hold silver, platinum, and palladium in a gold IRA, but all precious metals must meet IRS standards.

For gold, the IRS requires metals to be produced by a national mint or an accredited or certified manufacturer. Except for gold American Eagle coins, all gold in an IRA must be 99.5% pure.

5. Have precious metals shipped to a depository

Any precious metals you purchase with your IRA funds must be sent directly to an IRS-approved depository. Delaware Depository and A-M Global Logistics are two examples.

If you have the gold shipped to you instead, the IRS will consider it a distribution subject to tax.

This entire rollover process can often be completed in less than a month, and most of that time involves waiting for money to transfer from your 401(k) to the self-directed IRA. Depending on your 401(k) administrator, that transfer could take 10 days to three weeks.

What is a direct vs. indirect rollover?

When you move money from a 401(k) to a gold IRA, you have two options: a direct or indirect rollover.

With a direct rollover, the money moves directly from your 401(k) administrator to the IRA. You could get a check from your 401(k) account, but it will be made out to the IRA custodian.

Meanwhile, an indirect rollover is money sent to you by your 401(k) account. Also known as a 60-day rollover, your administrator will deduct 20% from this check as tax withholdings. You’ll get this money back at tax time if you deposit the full rollover amount into your IRA within 60 days.

Which type of rollover is best?

A direct rollover is the easiest way to transfer money from a 401(k) account to a gold IRA. You don’t need to worry about taxes being withheld; there is no chance of missing the 60-day window to deposit money.

Some people prefer the indirect method because it provides an influx of cash they can use for a 60-day period. However, this can be risky. If you spend the cash for another purpose and can’t make your IRA deposit on time, you could owe a significant amount at tax time.

Are there taxes or penalties for rolling over your 401(k) to a gold IRA?

If you do a direct rollover, you won’t need to worry about paying taxes or penalties because the money goes from one retirement account to another. But an indirect rollover comes with the risk of both.

For instance, if you roll over $100,000 using the indirect method, your 401(k) administrator will send you a payment for $80,000 after withholding 20% for taxes. You then have 60 days to make a $100,000 deposit into your IRA. If you deposit less than $100,000, the remaining amount is subject to tax and applicable penalties.

So let’s say you don’t have an extra $20,000 available to cover the amount withheld from taxes and only deposit $80,000 in your gold IRA. In that case, the $20,000 becomes a distribution and taxable income. In addition to income tax, the IRS may tack on a 10% penalty if you are younger than 59½, the age at which penalty-free distributions from retirement accounts are allowed.

Assuming you make the full $100,000 deposit, you should get the $20,000 withheld for taxes back when you file your next federal tax return. But in a worst-case scenario, in which you miss the 60-day window to deposit the funds into your gold IRA, the entire $100,000 could become taxable and subject to penalties.

Pros and cons of rolling your 401(k) into a gold IRA

There are many good reasons to conduct a 401(k) to gold IRA rollover, but it might not be right for everyone. Let’s review the pros and cons to help you decide the best course of action.

Pros

• Opportunity to invest in gold, which is commonly used as a hedge against inflation and economic uncertainty.

• Plans may offer the option to rollover only a portion of a 401(k) balance, allowing you to diversify your retirement funds between precious metals and securities such as mutual funds.

• A ready source of cash for gold investments means no need to dip into other savings or redo your budget.

Cons

• Gold IRAs may have more fees than 401(k) accounts.

• Cash withdrawals in retirement may take longer since gold must be liquidated first.

• Significant risk of taxes and penalties if you attempt an indirect rollover and do not deposit all the funds into a gold IRA promptly.

Is a 401(k) rollover to a gold IRA right for you?

It’s always smart to discuss investment plans with a trusted finance professional who can provide objective, expert advice.

While we can’t tell you whether you should roll over money from a 401(k) to a gold IRA, here are several guidelines to consider.

If you …	Consider rollover?
Don’t already have an inflation hedge (e.g., gold) in your portfolio	✅
Want to own physical gold at a time when gold prices are growing	✅
Would like to receive tax benefits for your gold investment	✅
Own gold investments elsewhere	❌
Have limited savings or liquid assets	❌ (indirect rollover)
Have a 401(k) that doesn’t allow partial rollovers	🤔 (maybe)

Historically, gold negatively correlates with other marketable assets held in traditional 401(k) accounts, meaning that gold typically performs better when other assets perform poorly and vice versa.

Erin Kinkade

CFP®

If you don’t already own gold and would like to add it to your portfolio while also getting tax benefits, a 401(k) rollover could be a smart financial move to meet these goals. But if you already own gold and aren’t concerned about tax benefits, a rollover might not be right for you.

You should also exercise caution using an indirect rollover. If you don’t have savings available to cover the amount withheld for taxes, you should avoid an indirect rollover. A direct rollover may be wise, but going the indirect route could mean a significant amount of your nest egg gets eaten up by taxes and penalties.

If your plan administrator requires you to roll over your entire balance, you should consider your other retirement assets. If your 401(k) represents your entire savings, you may not want to roll the full balance to gold. Diversifying your holdings is always smart, no matter how good any asset is.